According to Trust Economics, there is a shift to a multipolar world, with prudent fiscal policies and higher interest rates than in the previous decade. The post-Global Financial Crisis environment of tight fiscal policy, zero interest rates and free global trade did not work to the benefit of the average citizen in the West, leading to support for more populist policies.<\/p>\n
Donald Trump\u2019s second term will reinforce the trends that were already in place: loose fiscal policy and a continued backlash against globalization in the form of higher tariffs, tariffs that Biden has reinforced.<\/p>\n
The economic environment remains favorable as inflation has moved in the right direction and interest rates are falling in the US and Europe. We expect a \u201csoft landing\u201d and our assessment is that growth will accelerate again as we move into 2025.<\/p>\n
Targeting opportunities to outperform recent winners<\/strong><\/p>\n Focusing on equities, the S&P500 looks expensive, but valuations beyond large caps and outside the US look more affordable. Investors have become accustomed to relying on a small number of large companies to drive the market, but this pattern is already starting to change.<\/p>\n We believe there is potential for further market expansion in the US, particularly given Trump\u2019s interest in reducing regulation and cutting corporate taxes.<\/p>\n Overall forecasts point to earnings growth in most geographies in 2025.<\/p>\n Trade<\/strong><\/p>\n Beyond the US, trade will be a major area of \u200b\u200bfocus if Trump fully implements the tariffs he announced during his campaign. In practice, implementing such sweeping tariffs may prove difficult, but the uncertainty will encourage US companies to bring production back to the US. This could boost US growth at the expense of neighbouring economies, with Trust Economics also expecting increased monetary stimulus outside the US to offset the impact.<\/p>\n Risks are rising as positive expectations are built into market valuations. Specifically, with the 10-year U.S. Treasury yield around 4.5% to 5%, we believe that comparisons to bond valuations are putting a cap on equity returns (this is because higher bond yields can draw capital out of the equity market, as well as increase borrowing costs for companies).<\/p>\n Trust Economics continues to support the soft landing scenario, which could be a favorable development, and is more concerned that U.S. growth rates may be too fast, adding to inflationary pressures. Immigration restrictions and policies to bolster the corporate sector may increase the risk of domestic inflation, limiting the Federal Reserve\u2019s ability to cut interest rates.<\/p>\n Bonds offer attractive income<\/strong><\/p>\n Trust Economics believes that we are in a very different environment from the deflationary zero interest rate regime of the 2010s. As a result, bonds do not offer the same negative correlation benefits that they did last decade.<\/p>\n Diverging fiscal and monetary policies around the world will also offer cross-border opportunities in fixed income and currency markets. Strong corporate balance sheets support bond market performance.<\/p>\n If investors are looking for diversification, we continue to recommend gold, as we note that it provides protection against recession risks, just like bonds. It also provides a reliable store of value in the event of stagflation or geopolitical tensions.<\/p>\n Diversification is the key to resilient portfolios<\/strong><\/p>\n While the overall economic environment appears to be favorable for returns, we must not ignore the fact that there are many risks to the markets, with disruptions on an unprecedented scale, which manifest themselves in various forms.<\/p>\n The transmission of geopolitical events to the markets is usually through commodities. Although commodities have lost ground due to concerns about global growth, they still play a key role in diversifying portfolios and enhancing their resilience. This can be achieved through investments in the energy sector, while gold remains the safest asset.<\/p>\n Private markets can also provide resilience through exposure to different asset classes, which are typically more protected from geopolitical events than listed stocks or bonds. Examples of these include real estate and infrastructure, which offer resilient long-term cash flows, as well as assets such as insurance, where weather is the main risk factor.<\/p>\n Overall, as Trust Economics, we conclude that the conditions are favorable for positive returns in 2025, although there will be challenges to be addressed. A diversified approach, looking at different geographies and asset classes, can help strengthen the resilience of portfolios, regardless of what the coming year brings.<\/p>\n","protected":false},"excerpt":{"rendered":" According to Trust Economics, there is a shift to a multipolar world, with prudent fiscal policies and higher interest rates than in the previous decade. The post-Global Financial Crisis environment of tight fiscal policy, zero interest rates and free global trade did not work to the benefit of the average citizen in the West, leading … <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,58],"tags":[593,540],"class_list":["post-2483","post","type-post","status-publish","format-standard","hentry","category-economics","category-investment-destinations","tag-global-economy","tag-trust-economics"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/comments?post=2483"}],"version-history":[{"count":1,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2483\/revisions"}],"predecessor-version":[{"id":2484,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2483\/revisions\/2484"}],"wp:attachment":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/media?parent=2483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/categories?post=2483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/tags?post=2483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}